Navig8 Chemical Pools Inc. v Nu Tek (HK) Pvt Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Flaux |
| Judgment Date | 24 June 2016 |
| Neutral Citation | [2016] EWHC 1790 (Comm) |
| Docket Number | Case No: CL-2015-000695 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 24 June 2016 |
[2016] EWHC 1790 (Comm)
IN THE HIGH COURT OF JUSTICE
THE COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Mr Justice Flaux
Case No: CL-2015-000695
Mr D Semark (instructed by Navig8) appeared on behalf of the Claimant
The Respondents did not attend and were not represented
No of Words: 5558
No of Folios: 78
This is an application by the claimant, Navig8 Chemical Pools Inc, for the committal for contempt of the first respondent company, Nu Tek Hong Kong Pvt Ltd, and the second and third respondents, Mr Sharma and Mr Karthikeyan, who were two of the directors and officers of the first respondent.
The application arises in the following circumstances. The first respondent was a charterer of a vessel of which the claimant was the disponent owner. The first respondent loaded a cargo which was unlawful and legally dangerous, causing the claimant loss. The claimant commenced LMAA arbitration against the first respondent. The first respondent instructed Clyde & Co in Dubai, and actively participated in the arbitration until 14 February 2015, some 16 days before the arbitration hearing was due to commence on 2 March 2015. On that date, 14 February 2015, Clyde & Co ceased to act and the first respondent took no further part in the arbitration proceedings. The arbitration continued in their absence and on 1 June 2015 the arbitrators informed the parties that an award would be published imminently. The second respondent has subsequently asserted that, on that date, he ceased to be the sole director of the first respondent, and the third respondent became the sole director, an assertion which the claimants challenge, as I will come on to later in this judgment.
On 4 June 2015, the tribunal published an award which was subsequently followed by an amended award on 23 July 2015. By those awards they held the first respondent liable to the claimant in amounts of some $6 million, £385,000, and 3,000 Euros. To date, the first respondent has not honoured any part of those awards. Also on 4 June 2015, as it subsequently transpired, the first respondent closed its bank account with Standard Chartered Bank. The timing of that closure inevitably leads to the suspicion that the first respondent was already taking steps to avoid ever having to honour these arbitration awards.
With a view to obtaining satisfaction and as an aid to attempt to enforce the award, the claimant has instituted proceedings both in Hong Kong and in England. So far as the proceedings in Hong Kong are concerned, the Hong Kong court gave the claimant permission to enforce the award as a Hong Kong judgment on 17 June 2015, and issued a garnishee order on 22 July 2015. Following Standard Chartered notifying the claimant that the bank account had been closed, which was the account which had been the subject of the garnishee order, the Hong Kong court vacated the garnishee order on 28 August 2015. The Hong Kong court subsequently, on 16 October 2015, issued an examination order ordering Mr Sharma to attend for cross-examination as to the assets of the first respondent at a hearing to take place on 4 January 2016.
On 10 September 2015, the first respondent filed its annual return with the Hong Kong Companies Registry; that filing was carried out on its behalf by the company secretary with a company called Buttar Secretarial Limited. That return as filed by the company showed that the sole director of the company was the second respondent, Mr Sharma. On 25 September 2015, the claimant obtained a worldwide freezing order in this jurisdiction from HHJ Waksman QC, paragraphs 9 and 10 of which in the normal way required the first respondent to provide details of its assets worldwide within four days of service and to confirm those details on affidavit within eight days of service. The order was served on all three respondents in accordance with the order made by HHJ Waksman QC and with the rules of court, permission having been given to serve the order on the second and third respondents at email addresses for those second and third respondents of which the claimants were aware. The order was also served in accordance with the order of HHJ Waksman on the first respondent. Notwithstanding that, the first respondent failed to comply by the due date with the asset disclosure requirements in the freezing order, either as regards disclosure of assets or as regards the affidavit.
On 9 October 2015, which was the return date for the worldwide freezing order, the order was continued by Popplewell J and an order was made for the first respondent to give the asset disclosure by an appropriate officer or director, verified by affidavit, no later than 14 October 2015 for the asset disclosure and 21 October 2015 for the affidavit. Again, as before, that order was served on the first, second and third respondents in accordance with the order and rules of court. Both the worldwide freezing order and the continuation order contained an appropriate penal notice on their face, warning the respondents that failure to comply with the order would be a contempt of court punishable by imprisonment, a fine or sequestration of assets.
The deadline for the compliance with the asset disclosure of 14 October 2015 went by without the order having been complied with and, as I have already indicated, on 16 October 2015 the Hong Kong court issued an examination order against Mr Sharma. On 19 October 2015, the first respondent filed a notice of change of director with the Hong Kong Companies Registry, asserting that Mr Sharma had resigned as a director on 1 June 2015 and had been replaced on that date by Mr Karthikeyan. On 20 October 2015, the following day, the first respondent filed an amended annual return allegedly in replacement for what was said to be "the incorrect one filed on 10 September 2015", identifying Mr Karthikeyan and not Mr Sharma as the sole director.
21 October 2015, the date for compliance with the service of the affidavit pursuant to the order of Popplewell J, passed without that order having been complied with. It was not until 25 November 2015 that the first respondent filed a notice of resignation of director, purportedly dated and signed by Mr Sharma on 1 June 2015.
Pausing at this stage, it is submitted by Mr Semark on behalf of the claimant that the court should not accept that Mr Sharma did in fact resign as a director at any earlier date than the date when the notice of change of director was filed, and that the assertion that he had resigned as director on 1 June 2015 was untrue, and is merely an attempt by Mr Sharma to evade his responsibilities as the sole director of the company to comply with the orders of HHJ Waksman QC and Popplewell J. It is submitted by Mr Semark that it is inconceivable that, if in fact Mr Sharma had resigned as the sole director on 1 June 2015 and been replaced by Mr Karthikeyan on the same date, the company secretary of the company, Buttar Secretarial Limited, would not have been aware of that change of director and would not have filed a correct annual return with Hong Kong companies registry.
It is also submitted by Mr Semark that if any of this had in fact occurred, it is equally inconceivable that the notice of resignation of director would not have been served at the same time as the notice of change of director. He points out that, in fact, by failing to notify the purported change within 14 days of 1 June 2015, the first respondent had exposed itself to penalties in Hong Kong which it would have been unlikely to have done if any of this had really ever happened on 1 June 2015. He also points to the inevitable fact that the dating ties in very neatly with the date when the arbitrators first informed the parties that an award was to be forthcoming.
I am quite satisfied to the necessary standard of proof which, for the purposes of a contempt hearing, is a criminal standard, that Mr Sharma was indeed the sole director of the company at all material times until 19 October 2015, and the attempt to suggest that he had resigned as a director on 1 June 2015 is indeed an attempt by Mr Sharma to evade his obligations as sole director to ensure compliance by the company with the orders of the court, for all the reasons that Mr Semark gave. In any event, for reasons I will come back to in a while, whether Mr Sharma had genuinely resigned as a sole director on 19 October, or for that matter on 1 June 2015, it is quite clear that – given that he remains the chairman and managing contractor of the parent company in India, Nu Tek India Limited, and that Mr Karthikeyan (who is the general manager and appears to have been in charge of commercial operations) is clearly in a subsidiary position within the Indian company – Mr Sharma remains in effective control not only of the Indian company but of its subsidiaries including the Hong Kong company, so that, even if he has in truth ceased to be the sole director, he remains a shadow director of the first respondent, pursuant to the Hong Kong Companies Ordinance which for present purposes is the same as the English Companies Act.
Returning to the chronology, the application for committal of the respondents was first issued in this court on 8 December 2015. The Hong Kong court adjourned the examination order hearing from the date which had been fixed in January until 21 March 2016. That order has been served on Mr Sharma at the head office of Nu Tek in India,...
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